Gold trading outlook: futures steady as dollar firms, employment data eyed

Gold hovered near the $1 200 mark on Wednesday as a slight rebound in oil prices provided some support. However, upside momentum was limited by a firmer dollar, which rose to the highest since 2009 against a basket of major trading peers. Silver, platinum and palladium also gained.

Comex gold for delivery in February rose 0.44% to $1 204.7 per troy ounce by 8:42 GMT, having shifted in a daily range between $1 208.0 and $1 193.5 an ounce. The precious metal fell 1.54% to $1 199.4 on Tuesday. Prices slid to a three-week low of $1 141.7 on Monday before rebounding to a five-week high of $1 221.0 an ounce.

Gold drew some support after a moderate rebound in oil prices. Crude falling by more than 30% since June and OPECs decision not to cut output have significantly reduced inflation expectations, curbing demand for the precious metal used as a hedge against rising prices.

However, a stronger dollar pressured down the yellow metal. The greenback rallied to a seven-year high against the yen, with a gauge of its strength touching the highest in more than 5-1/2 years following bullish comments from US policy makers.

Federal Reserve Vice Chairman Stanley Fischer said yesterday that the Fed draws closer to dropping its vow to keep interest rates low for a “considerable time” and will emphasize on economic data guiding the interest rate hike.

“We don’t want to surprise markets,” Mr. Fischer said. “On the other hand, we can’t give precise estimates about dates that we don’t know, and that’s why the emphasis always goes back to the data, and not to the date.”

Separately, New York Fed President William C. Dudley said on Monday that nothing is certain and “judgment of the appropriate timing could change in response to incoming data and other factors that change the economic outlook”.

“When we do begin to tighten monetary policy, the pace of tightening will depend not only on the outlook but also on how financial market conditions respond as we begin to remove monetary policy accommodation” Mr. Dudley added.

Both Fed officials were optimistic about the pace of US economic recovery and underlined the benefits of lower oil prices for the US economy, downplaying fears the oil price rout will push inflation too far below the 2% target.

The US dollar index for settlement in December traded at 88.920 at 8:46 GMT, up 0.24% on the day, having earlier risen to 88.930, the highest since March 2009. The US currency gauge rose 0.82% to 88.703 on Tuesday.

A stronger greenback makes dollar-denominated commodities more expensive for holders of foreign currencies and limits their appeal as an alternative investment.

Investors will eye this weeks employment data from the US for further signs of robust recovery. The Labor Department is expected to report a tenth consecutive month of job growth above 200 000 payrolls, supporting the view of raising interest rates. Market players also awaited the outcome of the ECB and BOE interest rate decisions on Thursday to gauge the strength of two of the dollars main trading partners.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF and a proxy for investor sentiment toward the precious metal, rose to 720.02 tons on Tuesday, the funds first inflow in two weeks. Nevertheless, holdings remained near the lowest in more than six years.

Pivot points

According to Binary Tribune’s daily analysis, February gold’s central pivot point on the Comex stands $1 201.1. If the contract breaks its first resistance level at $1 210.9, next barrier will be at $1 222.3. In case the second key resistance is broken, the precious metal may attempt to advance to $1 232.1.

If the contract manages to breach the S1 level at $1 189.7, it will next see support at $1 179.9. With this second key support broken, movement to the downside may extend to $1 168.5.